NEW YORK, March 14, 2017 /PRNewswire/ -- Commodities rose slightly in February due to higher inflation expectations and macroeconomic headlines, according to Credit Suisse Asset Management.
The Bloomberg Commodity Index Total Return performance was positive for the month, with 13 out of 22 Index constituents posting gains.
Credit Suisse Asset Management observed the following:
- Precious Metals increased 3.93%, with Gold and Silver rising amid the possibility of higher inflation due to new US fiscal policy, leading to increased demand for the sector as an inflation hedge.
- Industrial Metals gained 2.24%, led higher by Nickel. The Philippines continued to tighten environmental standards as it cancelled contracts for mining projects near watershed areas.
- Livestock was 1.26% higher, driven by Live Cattle. The US Department of Agriculture reported beef exports were 30% higher in December 2016 compared to the same period the year prior.
- Agriculture eased 0.28%, led lower by Coffee. Coffee supply expectations for Brazil's main growing region improved as weather forecasts showed rains abating at the start of the harvest season.
- Energy decreased 2.72%, driven lower by Natural Gas. Natural Gas decreased as most of the US experienced abnormally warm temperatures throughout the month, dampening heating demand amid already ample inventory levels.
Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: "Initial compliance to the OPEC coordinated oil production cuts was high, helping to tighten global supply and demand balances. However, increasing US active rig counts grew US production to near 2016 levels. It is likely that OPEC will more frequently reassess the effectiveness of its output cuts as it seeks to stabilize prices at higher levels, yet remain cautious as its actions may bring about additional supplies elsewhere. Uncertainty as to whether OPEC will extend oil production cuts beyond June may derail plans by non-OPEC producers. With lackluster demand due to abnormally warm weather during the 2016/2017 winter heating season, the next catalyst for Natural Gas prices is likely US summer weather, as the potential for another El Niño event is steadily increasing. This event may also have the potential to impact agricultural commodities for future crop seasons."
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added: "From a macro perspective, the US Federal Reserve is likely to raise short-term interest rates soon, as the US labor market comes closer to full employment and as inflation continues to rise near or above Fed targets. However, the path of subsequent hikes and the future of fiscal policy remain unclear in the US. Assuming fiscal expansion does materialize, economic growth expectations may accelerate, which is likely to be inflationary in an economy already near full employment and with prices increasing at fairly normal levels. Consumer inflation and producer prices in Europe continued to accelerate. In Japan, inflation levels remained weak but were positive in the latest reading for January. Commodities have historically tended to outperform during periods of higher-than-expected inflation and may serve as a good diversifier within an investor's portfolio."
About the Credit Suisse Total Commodity Return Strategy
Credit Suisse's Total Commodity Return Strategy is managed by a team with over 30 years of experience, and seeks to outperform the return of a commodities index, such as the Bloomberg Commodity Index Total Return or the S&P GSCI Total Return Index, using both a quantitative and qualitative commodity research process. Commodity index total returns are achieved through:
- Spot Return: price return on specified commodity futures contracts;
- Roll Yield: impact due to migration of futures positions from near to far contracts; and
- Collateral Yield: return earned on collateral for the futures.
As of February 28, 2017, the Team managed approximately USD 8.8 billion in assets globally.
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This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.
Certain information contained in this document constitutes "Forward-Looking Statements" (including observations about markets and industry and regulatory trends as of the original date of this document), which can be identified by the use of forward-looking terminology such as "may", "will", "should", "expect", "anticipate", "target", "project", "estimate", "intend", "continue" or "believe", or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties beyond our control, actual events, results or performance may differ materially from those reflected or contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on such statements. Credit Suisse has no obligation to update any of the forward-looking statements in this document.
Certain risks relating to investing in Commodities and Commodity-Linked Investments: Exposure to commodity markets should only form a small part of a diversified portfolio. Investment in commodity markets may not be suitable for all investors. Commodity investments will be affected by changes in overall market movements, commodity volatility, exchange-rate movements, changes in interest rates, and factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Commodity markets are highly volatile. The risk of loss in commodities and commodity-linked investments can be substantial. There is generally a high degree of leverage in commodity investing that can significantly magnify losses. Gains or losses from speculative derivative positions may be much greater than the derivative's original cost. An investment in commodities is not a complete investment program and should represent only a portion of an investor's portfolio management strategy.
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